Companies that wind down operations in Nigeria or relocate their activities abroad sometimes assume that their tax obligations end once they leave the country. Nigerian tax law does not operate that way. The Federal Inland Revenue Service (FIRS) and the relevant provisions of the Companies Income Tax Act treat a company's tax liabilities as continuing until they are fully settled, even after the company has stopped trading or begun the process of deregistration.
A company that ceases doing business in Nigeria still has a duty to file returns for the period in which it was active, including the final accounting period up to the date of cessation. Where a company stops operations during a tax year, it is generally required to notify the tax authority and submit returns for that final period. Any tax assessed on those returns remains payable.
The exit process itself is tied to tax compliance. Before the Corporate Affairs Commission will approve the removal of a company from the register, the company is typically expected to show that it has cleared its tax liabilities and obtained the necessary tax clearance documentation. Directors and officers may also struggle to obtain personal tax clearance certificates where the company has unresolved tax matters.
Outstanding obligations can include companies income tax, value added tax, withholding tax, and any penalties or interest that have accrued. These amounts do not disappear because the company has left. The tax authority can raise assessments and pursue recovery within the periods allowed by law, including through enforcement measures where applicable.
For local subsidiaries of foreign parents, exiting Nigeria may draw additional attention to transfer pricing, withholding tax on remittances, and capital gains tax where assets are sold. Payments made to the foreign parent during the wind-down may remain subject to Nigerian withholding tax regardless of the exit.
The practical implication is that exit planning should include a tax due diligence exercise, settlement of all outstanding liabilities, and the issuance of final tax clearance before deregistration. Leaving Nigeria without completing these steps can leave directors and the entity exposed to future assessments and enforcement action.
